Mazda's (NSE:MAZDA) Dividend Will Be Increased To ₹12.10

Mazda Limited (NSE:MAZDA) will increase its dividend from last year's comparable payment on the 28th of October to ₹12.10. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

See our latest analysis for Mazda

Mazda's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Mazda was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 16.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹4.00 in 2012, and the most recent fiscal year payment was ₹12.10. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Mazda has grown earnings per share at 17% per year over the past five years. Mazda definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Mazda's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mazda's payments are rock solid. While Mazda is earning enough to cover the payments, the cash flows are lacking. We don't think Mazda is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Mazda that investors need to be conscious of moving forward. Is Mazda not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.